HC Deb 07 June 1946 vol 423 cc2350-61

1.18 p.m.

Mr. E. P. Smith (Ashford)

Mr. Deputy Speaker, you have proved to me the truth of Einstein's Theory of Relativity because, by calling on me today, you have put me back to last Friday afternoon when, owing to a regrettable clerical error, you decapitated me as I was in the act of rising to address the House; and you have added to my obligations by restoring me to life by your magic touch. I wish to raise the question of the valuation of our national assets; and when I use the term " national assets, I expressly wish to exclude any privately owned assets which would normally come under the heading of national capital. Not very long ago I attended a party of moderately intelligent persons when the following question was propounded in the course of conversation: " Given £1,000 a year and 80 years of good health, in which period of British history would you have chosen to live?" One lady, a distinguished civil servant, chose the Elizabethan age because she said she was convinced that women had more power and influence in that age than in any other before or since. For myself, I chose the period from 1750 to 1830 because I thought it would have been fascinating to have been a contemporary of Dr. Johnson, Gibbon, the two great Burkes—Edmund and William—and also of Shelley and Byron, with the exciting background of the French Revolution and the Napoleonic wars, to say nothing of the enchanting costumes.

All the others, however, including two economists who are not associated with me politically, chose the period 1830 to 1910. When asked why, their unanimous answer was, " because it was the era of the increasing value of the £ sterling "I thought that was a very striking answer; and it is undoubtedly true that all of us since 1910 have been living in the era of the declining value of the sterling. As a boy in 1900, I can very well remember what a penny would buy. Food at the moment is " hot " news, so I will take a few food examples. A penny would then buy four bloaters; it would buy three eggs; it would buy two cutlets or one chop. Yet, since then, while the has been engaged upon its long descent, the nation has been acquiring, in one way or another, more and more property, more and more tangible assets, and is now planning to acquire still more, under the various schemes of nationalisation.

There are four kinds of publicly owned assets which I have in mind. The first are the definitely State-owned assets; the second are municipally owned assets; the third are assets vested in public or quasi-public corporations, such as the National Trust; the fourth are endowments and charities. Yet we are as far as ever from having presented to us a national capital account. Quite recently, I thought I would test the Chancellor of the Exchequer's knowledge by asking him a question. I was in a very kind mood; I did not ask him a difficult question, such as today's value of the fleet or anything like that; I asked him a simple, easy, almost a kindergarten question: what was the value of the contents of our National Art Collections? The answer amazed me. He said he had absolutely no idea of their value, but that he was convinced they were priceless. The Chancellor is evidently a believer in the dictum of Oscar Wilde: Ignorance is a delicate, exotic fruit. Touch it, and the bloom is gone. I maintain that everything material must have a value and, therefore, a price, unless indeed it is priceless in the sense of being valueless. I hope to show to the House—or what is left of it—that this matter of the valuation of our national assets which goes far beyond the consideration of any mere question of art collections, is one which cries out for immediate action and the fullest possible inquiry.

I do not think anybody can be very happy with the superficial information doled out to us by the Treasury as to our financial situation. If we take the year 1944 to 1945, the latest year for which figures are published, we find that we have an internal debt of approximately £21,250 million. We have an external national debt of approximately £1,270 million as against a combined total of approximately £6,000 million in 1939. That is part of the price, and the least part of the price, that we have had to pay for saving the world. In addition to that, we have many sterling balances abroad; and we have recently solicited a gigantic dollar loan at what, in my judgment, is the fantastically high and arbitrary rate of exchange of $4.3 cents to the £

I do not wish to enlarge upon that, but I would ask my hon. Friend one very simple question. What are those three cents doing? Are they the accidental pips in the bottle of chemical lemonade, that "Touch of corroborative detail designed to give verisimilitude to a bald and otherwise unconvincing narrative "? I am informed that in the Middle East today, in the case of transactions between individuals, the £ and the dollar are regarded as being of equal value. Now, Sir, at home our production of goods that is to say, our replacement of real wealth, is not wholly satisfactory. That is partly due, I know, to our military commitments; it is partly due to the fact that our workers are suffering from seven years of overstrain; it is partly due, in my judgment, though I know the Minister of Food will not agree with me, to chronic under feeding; and it is also partly due to the lack of the main incentive to earn, namely, the existence of anything to buy,- wanted or worth while buying.

I was amazed during the Debate on 29th May, when we increased our salaries at the public expense—always a distasteful if sometimes adventurous thing to do —to hear reference after reference from all quarters of the House to the dread word "Inflation."I think that was probably due to an earlier announcement on the same day by the Minister of Transport of a substantial increase in railway rates. My right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) said last week that the Government were inviting inflation by their nationalisation of the iron and steel industries. I wish to express no opinion today on that point beyond saying that I think it is commonly agreed that the value of the — has approximately halved itself since 1939 and has reduced itself to about one third of its 1910 value. I believe we have to make the most strenuous efforts to prevent it going lower. Personally I remember too vividly the human misery caused by the flight of the mark in Germany after the last war to wish to see a repetition of such a situation here, on however relatively mild- a scale.

The main cause of inflation is undoubtedly factual; but there is a secondary cause of the greatest importance, and that is psychological. One of the duties of the Government is to restore our confidence in ourselves, and to restore other people's confidence in us. That. I confess, is not an easy task for the Government as it gropes its way with a song of one kind or another in its heart, into the grisly wilderness of nationalisation. It has been suggested to me by a distinguished economist that our publicly owned assets, as indicated by my four headings, do not exceed £ 7,000 million in value, and that the relation of that figure to the increase of our internal national debt reflects with some exactitude the relation of today's £ sterling to its 1910 value. I cannot help feeling that that explanation is more ingenious than true. I cannot help feeling that that figure of £7,000 million is much too low in the light of the present depreciation of the £I believe that a national capital survey would very quickly prove its falsity; and it is for a national capital survey I am pleading this afternoon. As things are, we are groping in a Cimmerian darkness; but not, I hope, for long, because soon the financial Secretary to the Treasury will be replying to this short Debate, and then, as Walt Whitman has it: ' The splendid sun with all his beams full dazzling will put my miniature doubts and fears to flight.

I would like to call the hon. Gentleman's attention to an interesting passage in Professor Campion's work on " Public and Private Property in Great Britain," with which, I am sure, he is extremely familiar. Professor Campion, an acknowledged authority on the subject, speaking of public property says: The property of the State, local authorities and charities is never the possession specifically of particular individuals never becomes liable to Estate Duty at the death of any individual, and is therefore, never valued for Estate Duty purposes. The Estate method cannot he used for public properties. Part of the income, however, accruing from public. property such as income from houses, Government securities and municipal trading undertakings, is assessed for Income Tax and can be capitalized in the same way as private property under the Income method. But in the case of other kinds of public property, such as libraries and schools, it is difficult to decide how they should be valued. All that can be done is to place a minimum value on public property. Then he goes on to discuss the difficulties attendant upon valuing roads and armaments and nationally owned assets of that kind. We are promised in the future a series of unbalanced Budgets. We are told that is part of the Keynes policy. But I contend that, with or without Lord Keynes, it was a thing which was bound to happen. It is not so much a part of his policy as it is the ineluctable dictate of economic facts. What is a Budget? It is, quite frankly, a national profit and loss account. What I am asking for is the presentation, at the same time, of a national balance sheet, that is to say, a national, capital account based upon a national capital survey. I know that this argument has been pressed -upon many occasions in this House and it has always been refused.

Major Bruce (Portsmouth, North)

Before the hon. Member leaves that point, will he be good enough to explain exactly how the Budget becomes a profit and loss account?

Mr. Smith

Because the Budget does not take into consideration any of the nationally-owned assets to which I am specifically referring. I prophesy that before very long the dictatorship of economic facts which has prescribed a series of what I call national profit and loss accounts, each showing a huge loss, will compel the eventual production of a national capital account. Our credit in the world today does not stand very high. One has only to read the Debates in the Senate and Congress of the United States of America on the dollar loan, to realise that many people abroad regard us as an insolvent debtor. I maintain that our credit—I may be wrong, and I am open to correction—would stand very much higher if the Government prepared in a comprehensive and comprehensible form, as a result of a national capital survey, a statement setting out our assets as against our liabilities. I think the Government in this matter have been altogether too modest. Of course, I acquit the Chancellor of the Exchequer personally of any share in that fault. As it is, many people in this country and abroad review our Budgets, and accept us at the Chancellor's dismal annual valuation. I am well aware that the Government provide masses of statistics from which the economically erudite can cull much information, though by no means all. But these statistics are not presented in a form readily understood by the man in the street here, or the man in the street abroad, or, what is sometimes even more important, by the man in power abroad. I am sure that an appraisement in tabulated form of our national capital, would help to that end.

Hon. Members on all sides of the House will remember that charming play entitled " Dear Octopus "In which Dame Marie Tempest made one of her last appearances. Well, nationalisation is the " Dear Octopus " of hon. and right hon. Gentlemen opposite. I am sure we on this side of the House would agree with the noun though we should violently disagree with the adjective, except, of course, in its narrower financial sense. That octopus may grow or, please God, it may wither and die; but I would remind the House that the octopus is a tough and nasty beast. It exhibits remarkable resilience and flexibility, and, when engaged in the act of navigation, is surprisingly streamlined.

It is just within the bounds of possibility—I put it no higher than that—that that octopus may throw out more ugly tentacles and grasp still more industries. Therefore, it becomes a question of major importance that we should have an annual precis of our national assets in the form of a national capital account. It has been found a convenient technique in commerce for about 250 years; and now that the State is going in for commerce on a gigantic scale, it must adopt a similar practice. How else can the public, and we, who are the representatives of the public, assess the results, in terms of capital, of the huge system of State industrialism of which we are now witnessing the inauguration?

1.39 P.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)

We should finish this part of our proceedings in six minutes and it will be very difficult for me, I am afraid, to reply to the hon. Member for Ashford (Mr. E. P. Smith) in that time.

Mr. E. P. Smith

I am sorry, I thought we had been given a little longer than half an hour.

Mr. Glenvil Hall

With your permission, Mr. Speaker, I will take a little longer than the time allotted but I will be as brief as I can be. The hon. Member covered a very wide field. His title for this Adjournment Debate was to be "The National Balance Sheet " but he has strayed a little wider afield.

Mr. Smith

It was "The Valuation of National Assets."

Mr. Glenvil Hall

The valuation of national assets with particular reference to a national balance sheet. The hon. Gentleman started with the age of Johnson before he dealt with the subject set down for Debate. He put questions to me about the odd three cents in the rate of exchange laid down for the loan from America, if we get it; then he was very knowledgeable and learned on the subject of inflation, he brought in Walt Whitman with a most apt illustration from his poems and also quoted from Mr. Campion's book. It is impossible for me to go over the whole of the ground covered by my hon. Friend, much as I would like to do so. As I understand the point he has in mind, it is that he would like to see the national accounts divided into two. He would like what is termed in the commercial world a profit and loss account or an income and expenditure account, and secondly, he would like also to have a national balance sheet. Such a change, as he very rightly said, has often been mooted in this House and to many people it has great attractions. However, it would be very difficult to accomplish and the disadvantages, even if it were easily possible, would greatly outweigh the advantages that might accrue. The system which is common and proper in a commercial concern is quite inappropriate in connection with State finances. The object of a profit and loss account is to show for any given period the net profit available for distribution after taking account of things like charges incurred in earning the revenue and the making of provision for maintaining the value of the capital assets of the concern in question.

The object of an income and expenditure account, as I think my hon. Friend will agree, is very much the same. If it is compiled properly it shows all the income and expenditure arising in respect of any given period whether that income has actually been received or the expenditure has actually been paid out. Our Exchequer accounts, on the other hand, are cash accounts. All that is included in the Exchequer accounts is the income actually received and the expenditure which has in fact been made. The Exchequer accounts presented to this House do not include, for example, taxes which are due —and which undoubtedly will be received or, at any rate, most of them. That is an asset but it is not included because it has not been received within the period. I take it that the hon. Gentleman, if he wants us to do the job properly, would like to see all moneys to which the Treasury is entitled included in the year's National Account of expenditure and income. If we had to do that, quite definitely it would hold up the presentation of the accounts. At the moment, as hon. Members know, with the year closing at the end of March it is possible for the Chancellor of the Exchequer to present a Budget towards the end of April—sometimes fairly early in April. This year I think he presented his Budget about the middle of that month, a week or two after the national accounts were closed. When one considers the amazing complexity of the national accounts and the enormous amount of book-keeping which has gone to their compilation, I think hon. Members will agree that that is rather a wonderful achievement. It could not be done if, as a commercial house would have to do, we had to compile a profit and loss account—

Major Bruce

Would not the hon. Gentleman agree that the disadvantage in delay would be more than compensated for by the accuracy of the final result? Would he not agree that the existing receipts and payments account—it is nothing more—is not entirely satisfactory?

Mr. Glenvil Hall

If I had time I intended to touch on that, but I will deal with it now. It is our view that, taking the thing by and large, the result now is just as good as if we were more accurate and did in fact produce a profit and loss account in the ordinary, accepted, commercial use of that term. Curiously enough, perhaps, the amount of arrears which come in later, which are applicable to a given year and which are received, say, the year after, vary very little. If it were possible with ease and certainty to make up a profit and loss account, as a commercial house does, the nation would find that the outturn was very little different than at present though, by the way, it would take much longer to do that. We include, of course, in a given year the arrears received from previous years, but do not take account of the arrears which are outstanding. The curious thing, however, is that year by year arrears approximate roughly to much the same amount. So that the result in any given year approximates to the actual position.

Major Bruce

I am sorry to interrupt again. This is rather important I should have thought, during the years following a war in which there is a large amount of terminal expenditure and indeed sale of war assets, that would hardly count. I should have thought, at the commencement of a new economic era which is heralded by this Government, it would have been far better to have adopted a more comprehensive and accurate method of accounting.

Mr. Glenvil Hall

I do not know how many wars there are going to be. I hope that we have seen the last of them. If we are to adjust our accounts in normal times to the expectation that presently there will be a war with later abnormal income coming in due to the sale of war stores and surplus material of one kind and another—well—that is an argument, I must admit that does not appeal to me. We have gone into this with a good deal of care, and in normal times—we must budget for the normal, I think—if we did produce an income and expenditure account and took account in it of items outstanding on both sides, that the difference between that form of accounting and the one we now adopt would be very little so far as actual figures were concerned.

My hon. Friend said that he would like to see balance sheets compiled year by year showing all forms of national assets as such. He also mentioned municipal assets. I will not go into that now save to point out that there would be difficulties there. Municipalities themselves compile their own accounts and where they are dealing with a trading concern and the question of income tax arises, they do now, very largely, adopt commercial methods. They might feel anyway that the matter was their concern and not the concern of this House. In addition, I gather the hon. Member wants a national balance sheet compiled annually to show what properties and other assets were in the possession of bodies like the National Trust. All that would be most interesting, but would it be any use? Really, the conception of the ordinary commercial balance sheet is totally inapplicable when one comes to matters of this kind. In any case, even with a commercial firm when they take a valuation, say at 31st December, what does it amount to? It is somebody's guess that at that given date an estimated value can be placed on certain assets. It is nothing more—

Mr. E. P. Smith

It is an informed guess.

Mr. Glenvil Hall

As the hon. Gentleman said in the course of his speech, money values years ago were very different from now because the value of the pound has changed—

Major Bruce

I think the hon. Gentleman is introducing a theme into the argument which is hardly relevant. If we are going into methods of compilation I would point out that all measurements are actually guesses. There is no such thing as precise measurement. I think it will be agreed that the methods of compilation employed by reputable firms are above reproach, at least, in this respect.

Mr. Glenvil Hall

I hope nothing I have said gives a contrary view. I am simply saying, and it is common sense, that when a commercial firm makes up its balance sheet year by year certain valuations are placed by somebody, I hope, with knowledge, on the assets owned by the company or firm. Although it may well be the value then, that is not to say that it will be the value in 12 months' time. If this were so they might as well take that value and never revalue again at all, but simply carry forward the figures in their books. All I am saying is that that is, in essence, what a valuation of that kind amounts to. Undoubtedly, it is necessary to do that with a commercial firm, because they have shareholders and debenture holders, and they desire that information before they can pay out dividends or interest. In addition, if they know their job and want to carry on the company reasonably efficiently, they have to have the information in order to make provision for reserves and for various other items, which should, and must, under the Companies Acts, come into a balance sheet issued by companies of that kind.

Suppose we agreed with the hon. Gentleman and produced a national balance sheet, how could we make it up? It would involve the valuation of all the existing assets at home and abroad, and who is to put a value on some of these? The hon. Gentleman himself mentioned roads and quoted Mr. Campion, who appreciated the difficulty in the quotation he read out, namely, that it is almost impossible to put a valuation on many of these things. How can we, for example, put a value on the Houses of Parliament? To what other use could they be put than their present one? How could we put a true value on military installations in various parts of this country and abroad? It is futile, and I say this deliberately, to try to translate into terms of business accounting the intangible values of many State activities, military and civil. The hon. Gentleman himself gave me what I think is my best point when he said that he had put a Question to the Chancellor of the Exchequer asking him if he could give the present value of the pictures now owned by the State. The Chancellor replied that he could not do it, except to say that they were priceless.

Mr. E. P. Smith

But if he bad the pictures valued by some expert, he would get a valuation.

Mr. Glenvil Hall

Why should we attempt to value them? We are not going to sell them. What good would be done by going to the expense, year by year, of attempting to assess the value of the pictures which the nation fortunately owns? The fact is that the hon. Gentleman is asking us to do something which is not only difficult, but perhaps impossible, to do, and, when we had done it, it would not help us very much. Therefore, for the purposes of national finance, we think our present method has much to commend it, because we do, in fact, in the accounts referred to, divide income and expenditure into various categories. As the hon. Gentleman knows, the ordinary income and expenditure appears in the Exchequer accounts, and if we borrow money, as we very properly do from time to time for capital expenditure, this is shown separately in the accounts. I would like to say to the hon. Gentleman that the situation is not as bad as he tries to make out. In so far as it is desirable for the nation to know year by year how it stands, the accounts do show that with very great clarity. I agree that the uninitiated might find them difficult to follow, but, to any accountant or to any one reasonably versed in the study of figures, there is no difficulty in seeing just how we do stand. What is obviously clear is the fact that, by the introduction of the Budget year by year and by the statement of the Chancellor of the Exchequer, in Committee of Ways and Means the nation is given a real picture of what the situation is. In our view, and it is now I think the general view, that the mere taking of a year and drawing a line and striking a balance has nothing more to commend it than that it is an expedient, though, perhaps, an interesting expedient. So long as we have a balanced economy we know now that it is not essential that we should balance the Budget year by year. It seems to me therefore, that though we have had an interesting Debate, the proposals of hon. Gentlemen would not only be difficult but also very costly to accomplish, and, when done, would be largely useless as a guide.